Tuesday 30 November 2010

Predictions for 2011

That most reliable and well-established organization known as the independent office for budget responsibility is telling us its all going to be just fine, I would care to disagree.

First lets look at what the OBR are saying:
A revised growth for this year 1.8% which is 0.6% higher than predicted. This does make some sense considering the 3rd quarter was 0.8% growth, which is a lot higher than predicted. This figure also predicts good figures for the final quarter of this year. This is disputable, however sales figures for Black Friday were 0.2% higher than last year, which could suggest a strong final quarter to the year.
What is dubious is that it predicts 2.1% growth next year. I would question this, increased retail sales are likely to be being fueled by the VAT increase in spring, it makes sense to buy now. Also inflationary pressure (the multiplier effect) is only going to add to that. So this is only short term, next year consumption will fall and other sectors are likely to be hit. Construction is likely to take a hit from Government cuts and we are yet to see figures published from other industries. However some indicators do not look good.
The housing market has been falling dramatically; this is a good indicator of an impending recession in the UK. Also if we analyze these consumption and confidence graphs we can see that as the recovery took hold consumption and confidence went up however now it is falling again! These all point towards a double-dip. 

The OBR has altered its prediction of public sector job losses to 330,000 instead of 490,000. This however does not take into account all those on contract, the job losses may be made up elsewere, this is statistical fiddle because contracted workers are not public sector. The reason stated however was that benefit cuts have been higher and departmental cuts lower, this would of course lower the job losses but it is still likely to hurt the economy. Benefit cuts give consumers less to spend, which will cut consumption away. If anything direct benefits cuts have more of a direct impact on the economy.
The OBR is yet to truly be tested, its independence is questioned but it appears to be more optimistic than bias. They are not the only ones though:

We shall see what 2011 holds but I don’t believe it will be a good growth year!
I would predict low growth for this year 0.2-04% for the 4th quarter, but next year will see us slipping into negative growth.

Monday 29 November 2010

UK Debt is not a problem!

Liberal-Conservative coalition is convinced that their emergency tightening of the budget is the right thing and that the economy will cope. I'm not so sure and here is why.

I’d hate to repeat my self on the topic of why the UK economy is a mess… as discussed in my article on the fallacy on the 0.8% growth figure and my analysis on the latest OBR prediction the economy is not doing as well as the present Government would suggest with its policies.
Basic theory dictates if you withdraw fiscal stimulus (low taxes and high Government spending) then you will strain the economy and perhaps knock it back into recession. In this case we have a very weak recovery with a Government about to introduce tax increases, public sector cuts and benefit withdrawal, this would point to economic suicide. But why is the Government doing this? Because the country is ‘bankrupt’ we have the ‘worst deficit in the G20’ a ‘debt time bomb’ and we have to do something about it! Here is a novel idea… how about not bothering about the debt?

101 reasons not cut Government spending (now)
1) Firstly lets look at what economists consider the main objects to target in the economy. 1: GDP growth, 2: Inflation, 3: Unemployment, 4: Balance of payments (money going in and out of the economy). To pure economists these are the main objectives to target, is Government debt one? No... Government debt or what economists call the PSNCR is the 5th objective that is often omitted from the list. Why bother about it?
2) Ok so just because economists don’t list it, as a main objective does not mean it is important, in fact in resent years focus has been on equality and happiness also. But still number two Government debt does not have a direct effect on the Economy.
3) When a nation goes into recession something know as automatic stabilizers kick in.  These help stabilize the economy but increase Government debt short term. Automatic stabilizers consist of: lower taxes because of higher unemployment, lower wages and less profits and higher benefits to unemployed. A vast proportion of the debt is automatic stabilizers.
4) The UK Government bought out RBS and shares in other banks to stabilize them, this is not lost money! These shares were bought low and can be sold back later… that’s not debt that’s investment.  Bank bail out shares can be sold back at profit!
5) The Government is not anywhere near bankrupt! We have AAA rating that’s far from bankrupt. If we were bankrupt all our money would be worthless
6) The way the Government raises finance is by selling bonds, these are promises to pay the barer the sum of money on a date, these bonds are fixed we have a long time to pay them back. Why not wait?
7) Ahhh but you say that who will buy these shares? Well shares are bought on the bond market, so has this market been more reluctant to trade out bonds? Has it heck! People will buy our bonds. 8) But that’s not the issue, the issue is that our interest goes up because we have to attract people to buy them. True the price is increasing (which is bad) but it is by no means much by international standards and at just under 4.5% it is less than most consumers could get a loan.
9) Journalists like to compare debt to a persons debt… well consider this how much was your house worth when you bought it? How much were you earning? Now work out the value of the house against your yearly salary… that is your equivalent to government debt now. I should image its quite high? Government debt is around 70%.
10) How about me? Well a rough estimate tells me after I’ve taken my university loans and worked out my income its rough estimate of 660%. Oh no I best panic and sell my laptop… what!?
11) This is a key one: DEBT IS REDUCED WITH TIME – INFLATION ERRODS DEBT. Take out a loan for £100 now, and spend it when you come to pay it back a  year later assuming inflation is 2% your debt is worth 2% less because the person you are now paying £100 too will need £102 to buy what you bought with it last year. That’s inflation!
12) So remember that figure of 4.5% interest on Government bond repayments. its actually 2.5% if you negate inflation. That’s assuming inflation is 2%. It is actually 3%+ at the moment.
13) Compared with the past our debt is minimal:


14) compared to recent past it is minimal:



15) Debt is at a fixed point in time. If our debt is 60% of GDP in 2010 by 2030 it is likely out economy will have grown by 40% so the debt will be proportionally less of our countries income when we come to repay it.
16) If we cut spending now we will lower Government spending that will lower AD (total demand or spending) which will lower GDP17) If we cut spending now we will cause unemployment, like the 2+ million predicted from the budget.
18) If we increase unemployment we will likely increase crime.
19) If we decrease public sector budgets there may be union action20) Cuts to infrastructure will damage UK business! (damages AS)
21) Cuts to the education system will mean the next generation will have less knowledge/skills so the economy will suffer in the long run. (reduction in supply side)
22) People made unemployed in the public sector will spend less money, so those in the private will suffer! 23) People with less benefit will spend less money, so those in the private will suffer!24) The last time we were in this situation we found our self in a depression then WW3…
25) maybe we should not cut our military in just in case.26) Increasing Taxes such as VAT to 20% is recessive creating more inequality.
27) If we go into double dip the automatic stabilizers that are out of the Government control will increase making the debt worse!
28) If we continue to support GDP by spending then automatic stabilizers will fall and are falling! 29) Government deficit is already falling; even without a budget slashing Spending things will begin to get better.
30) Next time the economy is in ‘overheat’ we can reduce spending to stop a positive output gap and prevent another recession. 31) Next time we have high demand pull inflation we can deduces spending to create a positive Government account and pay back some of the debt and sole inflation problems.
32) Ireland is in economy difficulty and so it 33) USA this means we will have less exports to these countries and they are our main exports. This is bad for the economy Government needs to make up for this fall in exports.34) House prices are falling, this is a signal that the economy is becoming heading towards recession, surely this would suggest we do not have a strong enough to take the hit of cuts. 35) Equally consumer spending is falling36) Unemployment is a lagging indicator, so if we go into a double-dip which theory states we may do if we cut back now then unemployment will only get worse and say like that for a long time.
37) Those employed by the public sector have skills that are not valued by the private sector! Crowding out theory suggests the private sector will create jobs with cut backs, how can this happen. What kind of private sector business wants to employ millions of civil servants? 38) Those unemployed require training to get back into the labour market, how can they do this with increased tuition fees, less adult education etc..
39) The longer people are unemployed the more their skills depreciated, the focus should be spending to get unemployed back to work not creating more unemployed making it more competitive for people to find jobs.
40) “
the number of vacancies for the three months to October 2010 was 453,000, down 27,000 over the quarter” –ons Where are the jobs for the unemployed and soon to be unemployed?41) Front line services will be cut WITH implications to their service provided.
42) Government bonds are sold to the general public, the government represents the public. we owe our selves money? – a bit of  a silly argument granted. However:
43) The UK created £200bn in Quantitative Easing, the other name for this is Asset purchasing. This means we purchased £200bn worth of bank and Government debt. The proportion we bought from the Government can be written off.
44) If we do go into a double-dip then we can’t lower interest rates to raise AD and help us back into recovery because they are at 0.5%
45) Equally if we go into double-dip it would cost more to launch a new stimulus package to bring us back to positive growth than it would be to simply wait before cutting the debt

At this point the time opportunity cost of listing another 56 
would out weight listing them so I will chose to stop this list here… 

The point is why are we so concerned about this debt! Yes it is a problem but we can pay it back later when we have good strong growth, as Labour should have done during the recent boom.



Another interesting read on the subject can be found on the Hutton Economics Society website: The National Debt? Timebomb?

Wednesday 24 November 2010

Low Swiss Taxes (and a history of Switzerland)

As Ireland falters the Swiss Cantons are seizing the opportunity, but what are cantons and what is going?


A History Lesson
Switzerland contrary to what most people think is not a country as we think of today, it is a confederacy, which is why is official name is: Confederacy Helvetica (which is why you see CH crop up on documents, including in their number plates). 
During the middle ages 3 groups (or tribes) in the region of Helvetica (switzerland) know as The Uri, Schwyz and Ob/Nidwalden rebelled against the largest empire at the time the Holy Roman Empire. Unable to survive on their own they signed a document swearing to work together and protect one another. From that day onward they acted as one to fend off their foes, share resources and increase political leverage. Soon others wanted to join, rich city states such as Zurich joined making Switzerland ever stronger. Each one of these small separate nations or states within Switzerland is known as a canton.  
Because of nature under which Switzerland was formed each canton is very independent and can control is own taxes and most of its own public services (or to economists fiscal policy). 


Taxes
Because of this independence some smaller cantons such as Zug (population of 110,000) can set an extremely low tax rate but by doing so can attract many wealthy people and business HQs so make a huge amount of tax revenue. Taxing 100 people earning £10,000 each at 20% equals £200,000 tax income but taxing 5 people earning 6 billion each at 1% equals £0.3 billion tax income, which is why Zug is very rich. 
Switzerland's tempting tax regimes attract UK firms


Benefiting from Ireland's suffering
Ireland  has also played this game, it's corporation tax rate is 12.5% but pressures are mounting for Ireland to increase its tax to deal with its debt. The EU is also putting pressure on Ireland because it is taking business away from other European countries.
Switzerland however is free from this, not in the EU Switzerland can simply tempt firms away from Ireland with low stable rates! 
Cantonal eyes smiling at Irish Woes


Hollow Irish victory
Even though Ireland appear to have won their battle with the EU and can keep their corporation tax rate down they have had to increase VAT and a new property tax. Also firms are more jittery at locating their HQ in Ireland because of social unrest and threat of future tax hikes. 
Switzerland in contrast, favours bigness, has a history of low taxes, less risk of unrest and have many things directors expect around their HQ (world class food and hotels, lakes with yachts, skiing, high end market shops...). Due to language barriers within Switzerland many of the population speak English as well, reducing language barriers for locating firms.
Locating in Switzerland looks a better option for now and Ireland may suffer for it. 
Irish unveil tough four-year austerity plan  



Wednesday 17 November 2010

The Tithebarn Debate!


The Tithebarn project is a project is a project of great significance to me. It is a plan to develop the city centre of Preston the city in which i live (around). I personally am opposed to it for a number of reasons but may think it is a great idea.
The plan is to knock down Preston bus station (a dump but is very widely considered an building of architectural significance, it has been in may books of buildings to see before you die and TV programs) and build a smaller bus station further away from town... and build a huge new shopping complex. It is designed to rejuvenate Preston's economy however i argue that it will only hurt the economy by attracting huge monopolies to wipe out smaller shops and retail is not what the city needs. 
 I felt so strongly about it that i posted a wall post on the Preston City Councils facebook page and what followed was a heated debate, in which i used everything in my economic and political armoury and they responded in kind! It makes a great reading (if I don't say so my self) if you have time to read a young student spar with the city councils facebook page administrator! 

Putting it to the city council via facebook
(1st of September 2010)

Jon @ preston council: I have you seen the number of people in this group? if you so up for finding out what people want and being on Facebook then pay attention to this.
'save preston bus station' - fans: 1815   (Tithebarn - fans: 3) (Proud Prestonian - Friends: 2930)

Preston council (Proud Prestonian): As part of the Tithebarn scheme, the bus station is due to be demolished to make way for £700m regeneration of the city centre. The bus station is not fit for purpose, it is too big and costs too much money to upkeep and inside it is run down. It is essentially a huge car park and the space can be made better use of. The minister for local government agreed that it wasnt worthy of listing and we are now awaiting the outcome of the Tithebarn public enquiry which is due any day now.
Also, there is obviously support for saving the bus station but there is just as much support for not saving it and for regenerating the city centre which is in need of investment. Without demolishing the bus station the scheme would be over and we would lose all that investment for the sake of a bus station which is not fit for purpose and which is a drain on ratepayers money

Jon: Thanks for the response, I appreciate it. 
The city centre does need regenerating, granted. But I disagree that demolishing the bus station is key to that. The fact that it does have large parking facilitaties is surely an advantage if you are attempting to attract further people into the area. Why remove parking spaces if you intend to bring more people into the area? Its is not normally empty it is certainly in use. It is run down but why to use renovate it? Its iconic architecture could be used to help the cities economy.
 The minister for local government saw it not fit for listing surely that is a conflict of interest if he wishes to see this project go forward?
 There are to my knowledge a number of empty shops in the city, if we are not at full capacity for what space we have now why do we need to build more shops? Also why is it assumed that bringing in huge department stores will help the area, could it not just shift business away from other shops? 
Given the economic circumstances it would surely not be wise to risk the start of such are large project until we are confident we are clear of a double dip recession nationally. What if investors pull out?
I have talked to many people about this project just generally since the time I heard about it, and the best response I’ve found is at best scepticism. These are from different people of the city in different professions and age ranges.
I am young, I have lived her all my life and I care deeply about this city. It seems to me your are not looking at the needs of the people and making an assumption that there is a quick fix – building a huge John Lewis. There is no quick fix.
Please point me in the direction of groups of local residence, that are protesting to tear down the bus station... there are no as i am aware.. although i may be wrong

Preston council:  The project would not be complete for a number of years and so the threat of a double dip recession this year is irrelevant, the developer has the money available for the work to go ahead. There is no guarantee that the economy would be back to where it was when the project is finished, but we cannot just sit around and do nothing and let Preston fall into a poor state whilst all our neighbouring towns improve and regenerate leaving us behind. 
Some of the buildings in the city centre are in a poor state, the redevelopment will encourage investment in the city which has been on hold for many years.
The city needs to move forward, we cannot be held back because some people object to change. We receive complaints about how there is no regeneration happening in Preston, there is no way we can please everyone.
It is not a conflict of interest for the Minister to decide, that is their job! It would be if we gave ourselves permission!
Building a huge John Lewis is not the whole of the project and it cannot be referred to as that.
I am not aware of any Facebook groups around demolishing the bus station but from looking at forums including your own page, there are plenty of people who do not want the bus station to stay.
Not everyone will agree on this issue but we must await the outcome of the Tithebarn enquiry and then go from there.

Jon: I agree that development is need, peoples complaints for redevelopment can't be seen as a vote for the project.. they are telling you to come up with a solution not telling you they agree with the solution. Only time will tell if they do.
"some people object to change" is not strictly true, i certainly don't object to change. I just disagree with this proposed change. Sometimes we are so for change we don't look at what we have. Something does need to change in Preston.
On the point of it being a conflict of interest, the point I'm addressing concern to is that the Minister for local government and the city counsel and the tithebarn enquiry are all the same thing.. are they all not just local government? Are they not all open to influence by the same people? Please do correct me if I'm wrong, I'm merely enquiring not slandering.
The building of the John Lewis is the main bulk of the project.. it is marked on your vision for the project and named. Yes it says other shopping developments but these are not named, also headlines in local new papers have centred on the John Lewis.
Yes we can't be left behind, but if all these other towns and cites are developing should we be doing the same as them exactly? We should not be copying shopping developments on the assumption it will save the city. If all the towns build huge shopping centres then they will have no effect because you have to take customers from elsewhere. An example: You take custom from blackpool with the tithebarn, so they build a huge shopping complex and then take it back.. why not try something different to just building shops and hoping for the best. We could just make preston into an other cone city of britain with endless chain stores, which could just move out if they wanted.
People always have conflicting views on projects like this, but can blame me for expressing mine to you? I just hope that we will get whats best and what everyone wants.

Preston Council: Preston has always been known as a good shopping destination, people come from neighbouring towns like Blackpool for shopping, whereas people go to Blackpool for its tourism.
You mentioned car parking, the scheme will see the creation of more parking spaces than we currently have.
 No the minister for local government is a cabinet minister in central government and considers the application for the building to be listed.
The enquiry is completely independent and hears the arguments for and against from ourselves and those opposing it, Blackpool and Blackburn. Then it makes a decision based on the evidence submitted. This is not linked to gevernment in any way, but the minister will usually go with their decision.
Preston has suffered from a lack of investment in the last decade as investors wait to see what happens with Tithebarn. If you look at cities like Leeds, Manchester and Liverpool whose universities and jobs have helped them expand hugely in the last 10 years. despite the growth in our university that hasnt quite happened in Preston. No city centre apartments have been built, no new shops or offices in that time either.
This would be the springboard for the city being redeveloped.
We lose a lot of our talented garduates because they dont want to stay in Preston when they leave as the jobs and opportunities and even culture that a city should provide is not neccessarily here for them.
The Tithebarn project is not just about John Lewis, it is about transforming the city and bringing it into line with 21st century cities in the north.
The bus station simply does not fit into that. Why does Preston need the biggest bus station in Europe? It doesnt! Its too big, it costs too much to upkeep and its not in the right location.

 Jon:  I was merely using Blackpool as an example. I agree with you that Preston is used as a shopping area from people around Blackpool, Lytham way, considering that it does make sense to regenerate that sector. But could the development just take business away from the market? The tithebarn would have to bring in a lot more people or you would just shift customers around from existing business to the new huge stores. Which would hurt the economy because actually the new stores would simply drain money out of the local economy to their head offices. 
If the minister for local government is totally independent from the counsel in every way then i apologise.
 Yes the bus station is not prefect for the job but it is more than a mere bus station, its one of a kind and it just seems a shame to loose something that is unique to something that will be near identical to Manchester or Liverpool.

Preston Council: There is more than enough trade for Preston to sustain this size of retail complex, that is why it has been designed in this way after careful planning by the council and the developers, who would not put £700m if they thought it wasn’t sustainable. You must remember that a lot of people go shopping to the Trafford Centre or to Liverpool One and we would like to keep that trade in Preston but at the moment we don’t have the capacity to compete. 
We simply cannot keep the bus station because it is unique, it is a drain on finances, to bring it up to standard would cost £4 million alone! People often the quote the £700 million investment here but that isnt our money, its the developers money and they wouldn’t pay £4 million to clean up the bus station i'm afraid.
 Obviously people have different opinions on everything and we are aware that some people really want the bus station to stay but this is about moving forward and our elected councillors are doing what they genuinely believe is the best thing for Preston.
 The best person to speak to about this would be the Leader of Preston City Council, Cllr Ken Hudson, his office is here in the town hall if you would like to write to him. I think I have told you all I can tell you and at the end of the day he is the person in charge and I am sure he can answer your concerns better than I can.

Jon: ok, well thank you anyway. We shall see what the enquiry comes up with. Have a good day.

Preston Council And you!


What do you think?  Good or bad? Disagree with any of my points or the councils? Please comment.

Sunday 14 November 2010

Seriously?! Come on Clegg?!!!

They planned u-turn on tution fees all along?
There is only one conclusion to be made from this: The Liberal Democrats openly lied, consciously betrayed and still don't have the balls to admit it...    Tzzeeech Politicians!
What was Cleggs defense to evidence he always planned to back stab his supporters?
"I just didn't know, of course, before we came into government, quite what the state of the finances were."
LIES
At least give us the truth: you went into power with the Tory's to get power and influence (which may be in your opinion for the greater good) and in order to do that you had to accept their crusade on debt! It was clear what the state of the finances were, everyone knew! What to know what it is: http://www.debtbombshell.com/ there not that hard to find out is it Clegg?
Politicians have always deceived and tricked but to out right lie, so severely and in so many calculated numbers as the Lib-Dems do now it makes you wonder about what kind of democracy we live in?

Nick clegg can't count.


One of my first introductions to politics was seeing Nick Clegg on TV explaining how he would fight to bring back free tuition fees.
Then came the general election, Nick Clegg promised to the voters and the student unions that he would ensure tuition fees did not go up.
Since when did a promise of no increase in tuition fees become a triple in tuition fees... apparently Nick Clegg can't count! He might be one of an increasing number who struggle with math’s in the coming years thanks to the education cuts, so much for being the party of the young.
But was does £9000 tuition fees mean?

Basic macro economic principals states that the supply side of the economy made up of Land, Labour, Capital and Enterprise. Tony Blair famously said: "education, education, education" were the 3 most important things. By improving education he work force (Labour) improves and as such the economy experiences real growth. Increasing tuition fees makes no sense! It is cutting the long term in favour of the short term, in the long term to quote Maynard Keynes we really will be dead at this rate. This is contractionary supply-side policy which could result in negative economic growth... The theory that increased debt will not deter students is not valid at all! From asking around collage it really has had an impact on people considering university. It seems double standards to make a large issue out of government debt (which is not a main economic objective) then expect households not to be bothered.
To blame the universities would be folly teaching grants have been cut by 80% and budgets for research have gone down as well, universities have had to increase their fees. To strengthen the economy we should be investing in our universities not the opposite!
My opinion, it makes no economic sense. But is it fair? No! Is it progressive? NO! Is it politically wise? NO if your a lib dem.
The repercussions have already been felt by the conservative party, mainly on their HQ window panes.. although there is much more to come!
As for the Lib dems, its safe to say they have lost the key youth vote and the NUS are hot on their backs for betraying them. Even talking of hitting MPs with the book!
Could it be ulterior motives? A very cynical view would be to say the conservatives are attempted to reverse history and once again make higher education for the 'elite'.
Even those who will not have to pay the high rate for the first year (and hopefully the rest) are still feeling the pain by increased demand for 2011 places... offers are more demanding

Monday 8 November 2010

Vince defends Cable Prices

A battle is unfolding between a politician and the founder, CEO and Chairman of one of the most infamous companies in the world!
The story really begins at the Liberal Democrat party conference, but that's another tail we shall start at the first strike:
4/11/2010 is not a day that is likely to go down in history but perhaps it should for this is the day that Vince Cable stood up to Economic evil incarnate; Rupert Murdoch. Calling upon all his powers as business secretary Vince struck a blow against the evil monopolist holding to his vows for free markets and standing against his Conservative superiors In other words, the business Secretary intervened in the free market to prevent a take over.

News Corporation is the 3rd largest media conglomerate in the world, but what is really dangerious about News Corporation is its monopoly grip on media in certain countries. In the UK it owns the Times, the News of the World and The Sun that's a total of 37% of national news paper market. Then it also owns  17.5% of ITV and 39.1% of Sky and perhaps surprisingly it owns US social networking site Myspace. From an economic, political and social perspective this is dangerous! In a sense it was News Corps holdings that lead the attack on Ex-PM Brown and rallied the support for David Cameron so attacking news corp a brave move by Lib Dem Vince Cable? VERY brave.

Vince Cable spoke in his party conference speech that the economy must be managed through strong competition policy, not the Labour idea of a large state but equally not the Conservative blind hope in completely free markets, at least the Liberal Democrat seems to be true to his words in this case. He argued the move by Murdoch to take complete control of Sky would create too much market power for News Corp and be damaging to the consumer. He said that the monopoly power News corp would gain would see unfair price rises for customers. Much more than this, he reffered it to OFCOM for further investiagtion! Vince may even be moving to split Murdocks empire in half!

As I said before the attack on Murdoch is very brave, he is a powerful man to make an enemy of. Murdoch is a strong ally to the Conservative party making Vince an unpopular man within the coalition, but also Murdoch could be provoked into using his media power against the Liberal Democrats. However while it seems politically stupid short term, long term Vince puts himself in good stead, within the party and their voters he will better respected after all the liberals never really had a love for Murdoch! In this sense what has he got too loose, Murdoch was never going to be his ally so why not hit him while he can.

Its not only an economic and political move though, if Vince Cable splits up News Corps holding in the UK he will answer the cry's of many saying that Murdoch influence is dangerously strong. One man controlling a huge proportion of the media means one man and voice his opinions loudest, which history tells us is very dangerous.

Primary Source:
http://www.mirror.co.uk/news/top-stories/2010/11/05/business-secretary-vince-cable-blocks-rupert-murdoch-s-bid-to-buy-sky-115875-22693408/#ixzz14PPzz28g

Sunday 7 November 2010

Microsoft VS Opensource

There is a fascinating economic war going on, that mainly people don't know about it!


In the beginning
In simple terms: Back in the early days of the personal computer several giants rose up to fight for the throne, mainly Apple and Microsoft. Both created operating systems to run on PCs (or Macs in Apples case) but these systems needed applications and programs to run on them. So many other firms set up to provide programs, for example: Netscape sold an internet browser for windows. However Microsoft (and Apple) did not want this, they wanted monopoly power! So they played a number of anti-competitive tricks to remove the competition, these included the infamous buy outs. Also a trick played by Microsoft was to offer equivalent software for free, thus totally wiping out the competition. So when Microsoft released its next operating system, it released it with Internet Explorer, for free included! Netscape was wiped out.. Over time the giants gained more and more control over every aspect of the market but then something happened there was rebellion!



The open revolt:
Around the early 2000s something appeared to nibble at Microsoft's and the other computer giants power it was called open source. Not a new concept open source is a philosophy, the idea is that computer code is left open, visible and editable for anyone to improve. How does it effect Microsoft? Well, open source programers began building programs and together over the internet improving them until with such a range of skills and backing they launched them to compete with Microsoft. How to compete? well they beat Microsoft at their own game! They offered it for free. They created Firefox that cut apart internet explorers market share and more importantly they created and give away for free Open Office. When Microsoft's latest version of office costs around £90, open office is near enough identical for £0 and it has rattled the USA computer giant.

The Empire Strikes back
Times seemed good, as an economist and fan of good free ideas, open source was fascinating and some what of a blessing. However one should never under estimate Microsoft! For they have now begun a damning campain to whipe out opensource!

The video above is a brutal assault on open office, while the points raised have some weight it is again an example of advertising power damaging an attempt to revive the free market. If open source is so bad then no one would buy it, the free market would take its course and people would pay Microsoft the full price. Clearly consumers value Microsoft's products cheaper than they are selling them or they would still chose to buy the official Microsoft office which is better, but its monopoly power keeping the price up not good value. 
The video makes my stomach churn! Oh yes it is genius but dark. It portrays open source as evil, the feel of the advert looks more like an anti drug campaign or worse! All I can say is Microsoft has sunk to a new low, and after my opinions of them was improving.

Try open office for yourself: OpenOffice
Looking to get your own free open source software try: sourceforce

Thanks to: http://www.zath.co.uk/author/john-thompson/ - check him out for great tech news/reviews

Saturday 6 November 2010

More on spirt level

I have recently finished reading the spirt level and written a review, despite the reveiw I have further comments to make on the book.

Changing Ecomonic/Government objectives
Chasing ecomonic growth has been the primary objective for nations for along time, however, the other macro economic objectives have changed prioty over time.
During the reign of Margret Thatcher the UK focused on Inflation
The trade ballance was once prioitised but is now less favourable (US and UK having massive defficites)
The PSNCR was not seen as a problem to the Labour Government as much as it was to the new Con-dem government, whose recent budget was focused on reducing debt
GDP has always been the priority, with real growth being the holy grail of economics, however, I feel the wind of change!
New measures have been appearing recently, the happiness index, the HDI and recently I worked on my own measure (as part of a school project in which we dealt with the ideas of 'is GDP best?'), these are questioning GDP as the diffinitive way of bettering society.
With global warming the push is now away from consuming more and giving out more fumes, this is hard to do while increasing GDP (although we are trying) so many researchers are suggesting we could move way from it. Books such as the Spirt Level and other research suggests after a point GDP stops bettering us.
The Spirit Level offers us a new target to chase, Equality! No more: as long as everyone is getting a bit richer. The new Conservitive buzz word: fair tries to strike the right cord with idealist of the book although their polices are debatable..

Removing assumptions
In psychology we are taught never to assume, the spirt level breaks many assumptions. Such as highlighting that infact given a choice most of use chose to be fair freely and will punish others at our own loss to restore some justice. It also agrues: not just mangers are stressed, obesity is not caused by stupidity, society is getting more depressed (particularly youth) and many more!

It really is an interesting read, even if you don't take it's ideas to heart or go into it thinking you never will

Wednesday 3 November 2010

Review: The Sprit Level

The spirit level is a book that has summoned up a storm around it, both Ed Milliband and David Cameron are supposed supporters of the book and as it says on the cover: ‘A big idea, big enough to change political thinking’ – Sunday times . The book puts pressure for new economic policy and publicises the rising area of economics that is standard of living and inequality.
The book gets straight to the point, it believes that inequality is the most important problem facing society. It is easy to read, informative and despite the heavy topic matter and criticism it has a positive feel to it, quite witty. For an economist it is a dream, there is a graph on nearly every other page! This displays the information in the book quickly and really helps break up the book. There are cartoon sketch inserted quick frequently which add to the humour while reinforcing the arguments in the book.
I can not stress how easy it is to read, easy to dip in and out off, few areas of long spiralling text and if you feel like skimming over a section it does no effect the read of the book.
However the first 150+ pages of the book start to become a bit receptive, it goes through every social problem systematically and proves each on is linked to inequality, while fascinating at first you start thinking: ‘ok.. I get the point’ However it does well at presenting the arguments without being forceful and I found myself taking on board many of the points raised by the book. If part 2 (page 49 to 176) becomes a bit repetitive it is more than made up for by part 3.
The final section of the book is fascinating, it incorporates lots of economics but also delves into psychology, sociology and politics. While part 1 and 2 criticises the present system and identifies problems, the book is well rounded part 3 offers solutions and deals with counter arguments!
The arguments used to reinforce the book deal with society and many of them serve as useful trivia (such as making us think twice about the idea cave men were violent and strongest was king and how different ape relatives have very different societies).
Read this book
That is my recommendation, its intriguing and pleasant to read. I’d say it was open to anyone, GCSE to degree and economics or any subject.